Not that long ago, a business had very few choices when it came to funding its cars and vans. It literally boiled down to bank loan or pay cash, with hire purchase becoming readily available from the 1970’s
At Carlease UK, we speak to our clients who have replaced outright purchase with leasing and they tell us that a relationship with a local dealership was the main driver for them to buy their vehicles and that simply a lack of advice or choice was the reason for not changing. None of them ever enjoyed the experience of trying to sell the vehicle after three years and ended up back at the same dealer
In 1995 a significant VAT ruling meant that leasing companies could recover all of the VAT on the purchase of a new car. In one foul swoop the pendulum swung in favour of leasing a vehicle as the cost fell overnight.
Most company fleet managers prefer to know as many costs as possible, not being exposed to used car value fluctuations as you sell your vehicle is a good start. Add in the preferable discount rates that massive buying power of the leasing companies and the gap between buying and leasing widens further still. Additionally, you have an agreed monthly rental, this is fixed. It doesn’t go up if interest rates or the banks charges go up and should you include maintenance, which most business clients do, you have your servicing charges and in most cases, all your tyre needs included
The most popular business lease is contract hire. It accounts for more than 50% of all company cars at any one time. An interesting little side note here is that leasing as a term has no definition in legislation, it is a marketing term. It is a contract for the hiring of goods or equipment and falls under the legal term of bailment. This is well established legal term and means parting with possession of something under an agreement that includes for it being given back at future, defined date
Terms included in Leasing
Lessee, the lease agreement uses the term lessee to mean the client or the hirer of the vehicle. There is pressure in the industry to use clearer, non-legalistic terms, for example you rather than lessee
Lessor, the leasing company is the lessor and they own the vehicle. The broker is simply an intermediary that introduces your business via a credit application, to the leasing company. Taking contract hire as our example, you use the vehicle for an agreed period and mileage in return for paying an agreed, fixed rental. At the end, subject to it being in at least a condition acceptable under BVRLA rules and having covered no more miles than your contract, you simply give it back